Incenting former employees to roll out to trim numbers

[dmwe]

Would it be in violation of any rules to offer a gift card to former employees who still have money in the Plan incenting them to roll out so that Plan participant count drops below 100 and they can avoid an audit?

[Peter Gulia]

Has the employer tried charging nonemployee participants' accounts their proportionate share of the plan-administration expenses?

[dmwe]

Participants pay administration fees but I think the Company pays for the 5500 audit so it's in their best interest to get below 100 employees and avoid an audit.

[david rigby]

Any of the accounts below $1,000 (or whatever the mandatory cash-out limit in the plan)?

Also possible some of these ex-EEs have forgotten about it? Perhaps a friendly reminder letter?

[My 2 cents]

Good luck on finding everyone!

[dmwe]

This would be balance over $5,000 that they want out of the Plan to get their numbers down. It appears that they've been offered a $250 gift card incentive to move out of the Plan.

[NJ Mike]

Does the participant get to choose which store or sponsor the gift card is from?

[Peter Gulia]

Has the employer considered charging nonemployee participants' accounts their proportionate share of all plan-administration expenses, including the fees and expenses of the independent qualified public accountant?

[My 2 cents]

Has the employer considered charging nonemployee participants' accounts their proportionate share of all plan-administration expenses, including the fees and expenses of the independent qualified public accountant?

[semi-satirical comment] Would the selection of the independent qualified public accountant then be a fiduciary action, subject to litigation if the fees were higher than those of some other accountants?

[dmwe]

Gift cards are all from one company/store.

[david rigby]

Gift cards are all from one company/store.

...which may have limited "incentive" if significant number of participants don't, or cannot, access that store.

[GMK]

About the time they receive their account statements, send a reminder letter of how much in plan administration fees they're paying by not rolling out. Not paying administration fees is a gift card that keeps giving.

[jpod]

I can't think of anything wrong with that kind of incentive, but I'm not commenting on that. If employer is so concerned about this, consider splitting the plan into two plans, each of which will have well under 100 participants. I know the DOL has made some noises about this possibly not working, but there is no legal basis for that position.

[dmwe]

The root of the question is whether or not this would be some sort of prohibited transaction or run afoul of any distribution rules.

[QDROphile]

Is the gift card taxable income? It is not a gift. How is it being reported.?

[Peter Gulia]

An administrator's selection of an independent qualified public accountant is a fiduciary decision (even when the plan does not pay the IQPA's fee).

If all or some of the IQPA's fee will be charged against participants' accounts, an administrator should consider the relation of the IQPA's services and fee to incur no more than a prudent expense.